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Managerial vs. Financial Accounting: What is the Difference?

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Even in a shifting corporate and business landscape, accounting remains constant. Organizationally, financially, and legally, accounting is a core department in any organization, and the need for a highly trained accounting team is absolutely essential.

It’s a dual discipline. Any prospective accounting student needs to understand the differences between financial and managerial accounting, two separate branches of the trade that share similarities yet also have crucial differences regarding principles, methods, and applications.

Managerial accounting can be thought of as internal accounting, in that it is used to help in the running of the company. The information produced by managerial accountants enables managers and executives to make important decisions related to almost every aspect of the company. Managerial accountants give their work directly to managers and other decision makers within their company, and their reports concern category breakdowns and often projections into the future. They provide the costs of an organization’s products and services, budgets, and performance reports, which are comparisons of budgets with actual results.

Financial accounting involves sending financial reports, called income statements or balance sheets, to external entities such as lenders, tax professionals, stockholders, and the Internal Revenue Service. The numbers are objective fact, not future projections or past estimates, and they are audited by independent, third-party auditors.

While managerial accounting puts out profit and loss statements, job costing reports, and operating budgets, financial accounting delivers numbers only for those on the outside who need to determine the company’s market evaluation. Managerial accounting focuses on problems and solutions within an organization while financial accounting is concerned with profitability from without. Managerial accountants create internal operational reports, while financial accountants create financial statements that, although also distributed internally, hold tremendous importance outside the company.

Managerial accounting looks at helping the people within the company make it run more effectively, efficiently and profitably, while financial accounting informs shareholders, lenders, and Wall Street analysts, who view the company essentially as an investment. Those in managerial accounting typically have the designation of Certified Managerial Accountant while financial accountants must comply with various strict accounting standards and possess the designation of Certified Public Accountant.

Impeccable managerial and financial accounting are essential to the growth and continued existence of any business, and one of the first steps toward pursuing a career in either branch of the field is enrollment in a top quality Master of Accountancy (MAcc) program. A MAcc degree is invaluable for those nearing the end of their undergraduate accounting degree and looking toward employment at a “Big 4” firm, as well as for established accountants pursuing the CPA exam and needing 30 hours of graduate-level education.

The University of Scranton Online Master of Accountancy program includes courses that provide real-world application, ethical leadership, and cross-functional communication skills. Request more information or call 866-373-3547.

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